Terumo : Q&A Session at the Financial Results Briefing for the Fiscal Year Ended March 31, 2023 (FY2022)

Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at the time and are not intended to be guarantees of future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice.

Terumo Corporation

May 17, 2023

Q&A Session at the Financial Results Briefing for the FY22

Outlined below are the Q&As from the financial results briefing on May 15, 2023.

Hidemaru Yamaguchi: I am Yamaguchi from Citigroup. As for the last part, please include confirmation in Japanese.

As for the plasma innovation business, I think you are going to carry out the rollout from now on, but it was mentioned earlier that it will be done by FY2026. Do you have a specific timeframe for the rollout, such as around what time this fiscal year, or when? So, the timing of expansion of the rollout. Thank you very much.

Kenichi Hata, IR Terumo: Thank you. I will answer this question.

As Antoinette just mentioned, we are still in the limited launch, or limited market release, but this will move to a full-scale rollout in the current term, probably early in H2. I cannot say when it will end, but the transition will be completed at least within the GS26 (5-Year Growth Strategy from FY2022 to FY2026) period.

From now on, it will probably be difficult to report the number of centers at each fiscal quarter, but we would like to report when we have reached some milestone, such as 100 or 200, so we will discuss that with CSL.

Until the last earnings call, our productions have been affected by supply chain circumstances, but the issue has now cleared up. From here on, roll-out speed will depend on CSL's management.

Yamaguchi: Thank you very much. That is all.

Motoya Kohtani: My name is Kohtani, from Nomura Securities. I would like to ask one question about Cardiac and Vascular (C&V) business.

On page 11, there is a forecast for this fiscal year that shows a 7% increase in overall sales on a local currency basis, but I would like to ask what growth rate you expect for the C&V business in the US on a local currency basis this year. I think catheterization is

Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at the time and are not intended to be guarantees of future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice.

almost back to where it was before the COVID-19 pandemic, or is it still affected by the shortage of healthcare professionals?

Also, now that the business environment in the US is changing, more and more insurance companies are adopting a prior authorization system for catheterization and endovascular, so I wonder if there will be more dedicated products for radial procedures, which your company specializes in, if outpatient procedures are encouraged and treatment shifts to outpatient.

Although only Blood and Cell Technologies Company has been the focus of considerable attention, I believe that growth of this access is probably an essential item for achieving the mid-term plan, so, including these radial procedures, how is endovascular doing in the US? Also, can you tell us about this current situation and whether you are seeing a transition to radial procedures? That is my question.

Hata: Thank you.

As you say, majority of the GS26 revenue increase, in the amount of JPY300 billion, is C&V, with access devices being the second largest within that.

We are looking at 7% growth this fiscal year, in local currency terms, but the US will boost that. I can't give you a number, but we are looking at a growth rate that is higher.

As for whether the caseload has returned to pre-COVID-19 levels, it is still several percent away from there. Or this may be the new normal now, and there is no reason to expect this to recover anytime soon.

Then there is the shortage of healthcare professionals, which I hear is also improving considerably, but is probably not yet 100%. Since the conditions are the same for us and our competitors, we are determined to achieve the high single-digit figure mentioned in GS26.

Also, in our case, our strongest product is access, so we will continue to expand into radials. As you already know, for coronary arteries, it is more than 70%. One of the major themes of GS26 is to expand this to the entire body, and we have set a target value here as well. This is also a CSV theme.

As for outpatient procedures, the current situation is that non-hospitalization is required, so there is no choice but to use radials. But in terms of our sales the ratio is still only about 9 to 1, which is very small. So, it is not as if we are now entirely allocating the

Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at the time and are not intended to be guarantees of future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice.

marketing resources to radial and outpatients, but we are thinking about allocating resources at the optimal time so that we do not lag behind the competition.

In his presentation, Mr. Sato mentioned the deployment in Europe of "Nagomi." We have not received any questions, but President Osada is here today, and is actually in Paris on the eve of the EuroPCR, which starts tomorrow, so I would like to connect with him and ask him about his confidence in "Nagomi" in Europe.

Mr. Osada, are you there?

Toshihiko Osada, President, Cardiac and Vascular Company Terumo: Yes, can you hear me?

Hata: Yes, we can hear you.

Osada: As Hata just explained, I am in Paris this week, and tomorrow I will participate in the EuroPCR, the largest cardiovascular conference in the world, where the "Ultimaster Nagomi" will finally make its debut in Europe.

Last year, we presented the very strong clinical data of MASTER DAPT at the European PCR conference, and this year, with the debut of Ultimaster Nagomi, I think we are in a very good position.

It is also recommended by the Healthcare Insurance Organization in France. In addition, we have a very good relationship with the board members of EuroPCR in Europe, and we are planning to expand our training and other activities, so we hope that you can look forward to the rapid progress of "Nagomi."

Kohtani: Since you are here, Mr. Osada, I was quite shocked to hear that you are considering entering the US DES market in the future. Is it correct to understand that Phase 3 would have to be conducted in America, so it won't happen for quite some time?

Also, you have not thought much about the US until now, but now that you are entering the US, does that mean that the impact of the one-month DAPT will be that great? This is my final question.

Osada: You are right, it is still under consideration, so it is not a decision, but we are now considering it with the US industry in mind. Of course, as Mr. Kohtani mentioned, clinical trials are essential for this purpose, so it is undeniable that it will take some time.

Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at the time and are not intended to be guarantees of future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice.

The reason why we are now considering the US market for drug-eluting stents is that, compared to the past, we have considerably expanded the scope of our business from the access-only US market to the therapeutic device market. We are now in the process of conducting a close examination to determine the extent to which we should consider including other products, including drug-eluting stents.

Kohtani: Thank you very much.

Osada: Thank you very much.

Ritsuo Watanabe: Thank you for the explanation. My name is Watanabe. I have a question about the profit improvement measures for GS26 that were explained by the President.

I am very grateful for this explanation as what will happen to margins has been a topic of discussion. My question is, I am looking at slide number 8, which says that you will raise 14.3% to 20%, and I understand that there are factors behind this increase, but the reality is, if you look at the single-year performance plan for this fiscal year, even if there is such a factor, the plan is that the improvement in margins will be quite offset this fiscal year by general and administrative expenses and investments in growth.

In that sense, I have a feeling that even if this is achieved, the margin may not improve to 20% if growth investment increases, and I would appreciate it if you could explain more about whether the risk there is limited or not.

Sato, President and CEO Terumo: Now, what is written here is the improvement rate as the minimum component that can be expected. We are aware that there are a number of other downside factors that could apply downward pressure over the next four years, and that we need to reduce costs by at least a greater extent, or to lower, than what is added here.

For example, we have set VC2 at 2%, but we are already thinking about this. We will accelerate the current range and speed and expand the measures we can take, so if we can add a little more to this figure, it will have the effect of offsetting the downward pressure. We hope to achieve an improvement of 5% to 6%.

Watanabe: Thank you.

Tomoko Yoshihara: My name is Yoshihara, from UBS Securities. Thank you for the explanation.

Among the information that Terumo discloses, the forward-looking statements including financial projections are based upon our assumptions using information available to us at the time and are not intended to be guarantees of future events or performance. Accordingly, it should be noted that actual results may differ from those forecasts or projections due to various factors. Factors affecting to actual results include, but are not limited to, changes in economic conditions surrounding Terumo, fluctuations of foreign exchange rates, and state of competition. The market share information in this presentation is partly derived from our own independent research. Information about products (including products currently in development) which is included in this material is not intended to constitute an advertisement or medical advice.

I also saw the President's strong determination to improve profitability in his presentation, but I personally think that improving Terumo medical care solutions' margins is a bit of a challenge. I think you are limited in what you can do because of its domestic focus. You will do a review of unprofitable projects here, but is there a possibility of going further in that review than what has been done so far? Could you please explain your focus and specialization in this sector?

Hikaru Samejima, President, Medical Care Solutions Company Terumo: I will answer this question.

We are considering a three-pronged approach to improving margins, the first being portfolio reform. I think the primary point here is still how much we can accelerate and expand the pharmaceutical solutions business. Since we started global promotion last year, we will finally start global expansion with regard to CDMO.

The second approach is pricing policy. We would like to implement the pricing policy by the end of this fiscal year.

Third, in the area of structural reforms, we are working to improve the efficiency of our sales structure over the medium term, and we have also launched a project to optimize our global operations and are reducing costs and increasing cost resilience.

As for unprofitable businesses, due in part to our long history, we have inevitably had a large number of products in the medical equipment and pharmaceuticals fields. We have reorganized and consolidated products, but we would like to go further and make cuts.

That is all.

Yoshihara: Thank you very much.

Mie Yamazaki: Thank you for the explanation. I am Ms. Yamazaki from Mitsubishi UFJ Morgan Stanley Securities. I would like to know the concept of the gross margin in the analysis of changes in operating income for the period just ended and for the current fiscal year.

Could you please tell us how much of each factor, such as inflation, one-time costs in the last period, and the mix, is being incurred, and what contribution each is expected to make to the JPY5.8 billion increase in profit that you are planning for the current fiscal year?

Hata: Thank you.